UK to challenge European Commission over red diesel

A long-running dispute between London and Brussels over the use of marked (red) diesel has intensified.

The European Commission is challenging the UK government position, which allows recreational boat owners to buy red diesel provided tax is paid according to the declared amount used for propulsion and heating.

Since November 2008, red diesel purchased for propelling a private pleasure craft in the UK has been subject to the full rate of duty.

However, boat owners may risk fines if red diesel is found in their tanks whle in the territorial waters of other EU states, most notably Belgium, where its sale for recreational use is not permitted.

In practice, when correctly declared and once marina fuel premiums are taken into account, there is little difference in cost between the fuel bought at a petrol station or at a marina fuel berth.

However, red diesel is often preferred by recreational boaters because many believe it to be free of the biofuels (fatty acid methyl esters – FAME) included in road diesel.

FAME may cause damage to seals and other components in older diesel engines but, in reality, there is no guarantee that red-marked fuel will not contain FAME (see panel below).

HMRC challenge

In May this year, the European Commission (EC) stepped up its infringement procedure against the UK, from a formal notice to issuing ‘a reasoned opinion’. The EC is calling for the UK to amend its legislation ‘to ensure that private pleasure boats can no longer buy lower-taxed fuel intended for fishing boats’.

On 24 July, Her Majesty’s Revenue and Customs (HMRC) indicated that the UK Government intends to challenge this, a decision welcomed by the British Marine Federation (BMF) and Royal Yachting Association (RYA).

Gus Lewis, RYA head of legal and government affairs, said: ‘The Government has for several years supported recreational boating and the industry that serves it over the continued availability of red diesel, and we are pleased that it has decided it should challenge the Commission’s stance.’

Increased costs

The BMF and the RYA say if suppliers were obliged to supply only white diesel to private pleasure craft, this would result in many fuel suppliers incurring significant costs in converting their equipment and impact upon the availability of diesel for leisure boaters along the coast, particularly where harbours cater mainly for commercial vessels.

The Inland Waterways Association (IWA) has also expressed concerns about the increased costs to boatyard operators and boat owners, as separate tanks would be needed for red and white diesel.

A spokesman for the European Commission said: ‘The reason we ask the UK to take action is because its legislation is not in line with Council Directive 95/60/EC of 27 November 1995 on fiscal marking of gas oils and kerosene.

‘Red diesel is not supposed to be sold to private boat owners: the marking’s objective is to allow reduced-rate fuel to be differentiated from fully-taxed fuel.

‘If marked fuel is sold to users who have no right to a reduced rate, this would undermine the efficiency of the marking as a control tool, not only for the UK but also for the other Member States if the boat sails to their territorial waters after refuelling in the UK.

‘In addition, leisure yachtsmen using red fuel, even if they have paid the full duties, risk heavy penalties if they travel to another Member State. So it’s not in their interest either.’

What’s next?

The UK has replied within the deadline, the Commission will need some time too to assess their answers and decide on the next step, ie close the case or refer it to the European Court.

PANEL – FAME in diesel fuel

Marinas and fuel berths may supply diesel to any one of three standards: ISO 8217:2010, BS EN 2869:2010 Class A2 or BS EN 590.

The latter is road fuel and will by law contain a minimum of 4.75% FAME. The other BS standard, however, is commonly available and may also contain up to 4.75% FAME.

Both standards permit a maximum of 7% FAME, but the current 4.75% figure is set by the goverment. Only the ISO standard is FAME-free, but it is not low- sulphur and therefore cannot be used on inland waterways or by craft that do not normally operate at sea.

If you’re concerned about FAME content, check with your fuel supplier before filling your tanks. They should know which standard they supply.

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